Is It Better to Lease or Buy a Car in the USA?

Getting a new car is a big decision and one that often comes with a significant financial cost. Whether you need the car for work, pleasure, or just to get around, getting a vehicle can make your life a lot easier. Leasing or buying cars are both popular options for getting a new vehicle, each with their own benefits depending on your preferences and situation. If you’re not sure which is the right option for you, here we’ll go over the pros and cons to see which one you should choose.

Advantages Of Leasing

One advantage of leasing a car is the price per month. Lease payments are typically cheaper than traditional monthly car payments if you buy one on finance, and they don’t require a big down payment. This allows customers who choose to lease instead of buying to afford a much newer and nicer car than they would have been able to buy for the same price per month. Car leases typically last around two or three years and can be ended early for an extra termination fee. In addition to costing less per month, leasing a car can also help build your credit score if you make payments on time. Adding a car lease to your credit score is a good way to add credit mix to your credit history. Another advantage is being able to just turn in the car at the end of the lease. This can make leases a great option if you like to drive new cars but don't want to bother with the hassle of selling your car and buying new vehicles every few years. With leased cars, you can stay on the cutting edge of comfort and safety features for a relatively low price. Leased cars are usually newer vehicles, so they have less wear and tear and fewer miles on them, meaning they aren’t as prone to problems and breakdowns as other cars. Depending on the terms of the lease, maintenance costs may be included in the price of the lease.

Key Takeaways:

·    Cheaper than finance

·    Lower downpayment

·    Can usually get a nicer car

·    Builds your credit score

·    A no-hassle option

·    Fewer maintenance costs

Disadvantages Of Leasing

One big disadvantage of leasing a car is that you don’t own the vehicle. A leased car might also be restricted on the mileage it can have at the end of the lease, making it a poor choice if the car will need to be used heavily for travel or business. If the car is damaged, such as from an accident or from heavy use, you may end up being charged extra at the end of the lease. When the lease is over, the car will need to be returned or purchased in roughly the same condition as when it was first leased. A leased car can’t be repainted, modified, or customized like you can with a bought car. While the monthly payments are typically relatively low on a car lease, there can be many hidden fees depending on the terms of the lease. These fees can pile up and reduce the financial benefit of leasing a car, so it's always important to read all the fine print before signing a car lease so that you know what you're getting into. While leasing a car can build up a credit score, you typically already need to have good credit to qualify for a lease, and you’ll never build up equity like you could if you purchased the car instead.

Key Takeaways:

·    Don’t own the vehicle

·    May have restrictions

·    May face extra charges

·    Can’t modify your car

·    Often has hidden fees

·    Often need good credit

Advantages Of Buying

A huge advantage of buying a car is that you own it. You can either buy the car outright or take a car loan making monthly payments. If you take out a loan, the title will be transferred to you after the last payment. If you buy a car, you can customize and use it however you want without having to worry about how it affects the lease. This can be a better choice if kids or pets are frequently in the car and might potentially make a scratch or a spill on the upholstery. There are no mileage restrictions, so if you need to drive a lot, buying can be the best option. If you’re looking to save money, you can also buy a used car to keep the price lower, although a used vehicle will have more wear and tear and may not have the latest features. Purchased cars have no restrictions on how they’re used as long as you stay within the bounds of the law, and offer much more flexibility in use. If you want to use the car for gig work, ride sharing, or transporting materials for business, it can be less risky to just buy it rather than risk damaging or staining a leased vehicle. Owning a car is a common way to build up equity and offers the potential to use the vehicle title as collateral in a car equity loan if you need to borrow money. When you are ready for a new car, you can trade in your old car to help cover the down payment on your new vehicle. While not as credit-building as a car lease, making car loan payments on time can still have a positive impact on your credit score.

Key Takeaways:

·    You own the vehicle

·    No restrictions

·    Free to customize

·    Ideal for heavy-duty use

·    Can be better for kids and pets

·    More financial security

Disadvantages Of Buying

The freedom offered by buying a car can be a double-edged sword, as you are on the hook for anything that goes wrong with it. You will need to maintain and repair a purchased vehicle at your own cost. While buying a car does build equity, the car’s value will depreciate over time and with use. Buying a car is often the second biggest purchase you will make, right after your house. Car loan payments can eat up your savings quickly if you temporarily lose your income or are between jobs. Even if you apply for a car loan, a car purchase will typically require a large down payment, usually between 10-20% of the car’s value. This can be a lot of money for most people and may push car ownership financially out of reach unless you have enough saved up. Monthly payments on a car loan are usually higher than lease payments on a comparable car.

Key Takeaways:

·    Higher maintenance costs

·    Value will depreciate

·    It may require a large downpayment

·    Monthly finance payments are usually higher

·    May need to settle for an older vehicle

What is the Verdict?

As you can see, there are pros and cons to each of these options. It’s important to consider each carefully and see which one is right for your circumstances. If you have enough money saved up to buy a car outright, that is usually the better option. However, the choice between a car finance loan and car leasing can be a difficult one. Car finance can be a greater commitment but does come with more financial security once you’ve made your payments. Both are good choices, so hopefully looking at the pros and cons here has given you more clarity on how to pay for your next car.